Green: market may rise with economic recovery – 09/05/2023 – Market

Better-than-expected data on the pace of growth in activity and inflation make room for appreciation in local market prices, in the assessment of resource manager Verde Asset, owned by Luis Stuhlberger.

“In Brazil, positive signs from growth and inflation indicators and from the fiscal field are beginning to open up space for the appreciation of risk assets”, writes manager Verde in a management report released this Tuesday (9).

In parallel with current data that show greater resilience of the local GDP and the labor market, the fiscal framework and revenue recovery measures continue to reduce investors’ perception of risk, adds the investment house with around BRL 28 billion in resources under management.

In recent weeks, major banks have started a wave of serial revisions of projections for the performance of the country’s GDP (Gross Domestic Product) in 2023, in the wake of better-than-expected data in the first quarter driven by the heated labor market and agribusiness.

In addition, the most recent data from the IBGE (Brazilian Institute of Geography and Statistics) show that inflation had a sharp deceleration in April, reaching the lowest levels since mid-2020.

Luis Stuhlberger’s manager also points out that Brazil had positive signs in relation to tax revenues, with the government obtaining “substantive victory” in the STJ (Superior Court of Justice) on the issue of ICMS benefits on the basis of federal taxes.

At the end of April, the STJ, in a unanimous decision, restricted the possibility of companies using ICMS tax benefits to reduce the base of incidence of two federal taxes (in this case, IRPJ and CSLL).

The trial facilitates the economic team’s plan to raise revenue by up to R$150 billion per year and thus rebalance public accounts. In the calculations of the Ministry of Finance, changes to the incidence of ICMS on the IRPJ and CSLL calculation base can yield up to an extra R$ 90 billion.

“It seems to increase the probability that the 2023 and 2024 fiscal targets will be met”, says Verde in the management letter, adding that meeting the targets remains important challenges for the 2025-2026 biennium.

Stuhlberger’s manager also points out that Congress stands as an important counterpoint to some government decisions, such as in the case of sanitation and even in the fiscal framework, “where the signs point to improvements in the project.”

Faced with the recent evolution of the domestic scenario, the resource manager’s flagship, the Verde multimarket fund, disposed of the position it carried in its portfolio long in dollar against the real, which was betting on a devaluation of the Brazilian currency.

In the strategy dedicated to shares, the option was to sell shares of companies such as BB Seguridade and Louis Vuitton, with the migration to names such as Lojas Renner and XP. These are stocks that should start to show a gradual improvement in operational indicators and are trading at attractive prices, according to the managers. Suzano, Rumo, Localiza, Equatorial, Energisa and Vibra continue to be the main positions in Verde’s equity fund.